Jry  C,  o,  HoSEzf. 

Recent  Changes  in 
Cotton  “Co-Op” 
Practices 


AMERICAN  COTTON  GROWERS  EXCHANGE 

Dallas,  Texas 


RECENT  CHANGES  IN  COTTON 
"CO-OP”  PRACTICES 

By  C.  0.  Moser 

President-General  Manager,  American  Cotton  Growers 

Exchange 
Dallas,  Texas. 

Reprinted  from  Commerce  and  Finance,  New  York, 
September  12,  1928 

HE  “Co-Ops”  represent  to  cotton  farmers 
their  best  efforts  of  organization.  They  and 
their  genuine  friends  are  gradually  realizing 

that  the  unit  of  modern  civilization  so  far  as  their 
economic  welfare  is  concerned  is  no  longer  the  in¬ 
dividual,  but  rather  the  group  or  the  commodity. 
They  are  realizing  more  and  more  that  the  great 
progress  which  has  been  made  by  man  up  to  this 
time  has  been  the  bringing  of  the  benefits  of  mod¬ 
ern  science  and  invention  to  the  largest  number  of 
people  through  their  acting  together  in  harmony 
with  natural  economic  laws  for  the  benefit  of  the 
group. 

It  is  becoming  clearer  to  the  thinking  men  in 
every  industry  that,  after  all,  all  barter  is  the  ex¬ 
change  of  labor  among  the  producers  of  the  vari¬ 
ous  commodities  which  find  their  way  into  com¬ 
merce,  and  that  the  exchange  value  of  the  various 
commodities  represents  the  relative  buying  power 
of  the  different  types  of  producers. 

It  is  further  recognized  that  an  unorganized 
group  is  incapable  of  dealing  on  a  basis  of  equal¬ 
ity  with  an  organized  group  in  the  exchange  of 
their  respective  units  of  production.  It  is  generally 
recognized  by  economists  and  others  who  are  inter¬ 
ested  in  the  economic  welfare  of  the  various  neces¬ 
sary  elements  in  our  national  life  that  the  great 
problem  of  society  in  the  future  will  be  that  of 
adjusting  the  relations  between  the  various  organ¬ 
ized  groups  in  such  a  way  as  to  bring  about  pro¬ 
gress  and  prosperity  among  the  workers  in  all  our 
essential  industries. 

By  progress  we  mean  the  participation  of  more 
and  more  people  in  the  good  things  of  life.  It  is 
with  this  idea  in  mind  that  the  cotton  farmers  have 
organized  themselves  into  a  modern  business  group. 
In  this  endeavor  it  is  significant  to  note  that  they 
are  applying  to  their  business  the  same  principles 
of  organization  and  conduct  that  are  being  success¬ 
fully  used  by  big  business  in  every  line  of  industry. 
The  purpose  is  to  bring  the  benefits  of  business 
organization  to  them  through  the  rendering  of  a 
greater  service  to  the  cotton  industry.  In  whatever 
way  it  is  legitimately  possible  to  assist  the  farmers 


along  these  lines,  that  is  the  legitimate  function  of 
the  “Cotton  Co-Ops”  according  to  the  views  of  their 
existing  leadership.  There  is  perhaps  no  better 
test  of  the  line  of  activities  of  such  an  organiza¬ 
tion  than  the  answer  to  the  question :  In  what  way 
may  the  cotton  farmers  contribute  a  larger  service 
to  the  cotton  industry,  which  service  will  reflect 
back  to  them  the  appreciation  of  the  trade  and 
society  in  larger  returns  for  their  efforts? 

Analyzing  the  activities  of  the  Cotton  Co-opera¬ 
tives  from  this  point  of  view,  there  is  perhaps  no 
better  point  of  beginning  than  to  say  that  it  is  the 
function  and  responsibility  of  the  cotton  producers 
to  produce  both  economically  and  in  sufficient 
abundance  to  meet  the  world’s  cotton  requirements, 
but  in  return  for  this  service  to  society,  the  cotton 
farmers  are  entitled  to  a  fair  share  of  the  wealth 
they  create.  Production  beyond  the  world’s  needs, 
excessive  costs  of  production  and  distribution  and 
innumerable  wastes  from  the  producer  to  the  con¬ 
sumer  are  largely  responsible  for  the  fact  that  the 
cotton  farmers  as  a  whole  are  among  the  lowest 
paid  skilled  workers  of  the  country,  even  when 
compared  with  other  branches  of  the  agricultural 
industry,  which,  as  is  generally  known,  ranks  at 
the  bottom,  or  nearly  so,  of  all  the  essential  in¬ 
dustries  of  the  nation.  The  limiting  factors  in  the 
success  of  the  individual  cotton  grower  are  as 
follows: 

1.  His  cost  of  production. 

2.  His  volume  of  production. 

3.  Price  received  for  his  products. 

There  are  many  points  to  be  considered  in  the 
study  of  the  cost  of  producing  cotton  by  the  indi¬ 
vidual  farmer.  Space  will  not  permit  a  detailed 
discussion  of  this  important  phase  of  farmer  pros¬ 
perity.  While  the  American  farmer  is  the  lowest 
cost  producer  among  the  farmers  of  the  world,  on 
account  of  machine  and  large  scale  methods  used, 
there  still  remains  room  for  improvement  along 
the  lines  of  both  quality  and  volume  of  produc¬ 
tion,  increased  acreage  yields  and  generally  reduced 
costs.  The  work  of  the  state  and  Federal  govern¬ 
ments,  state  experiment  stations  and  others  for  a 
long  period  of  years  has  resulted  in  much  progress 
along  this  line.  The  exercise  of  intelligence,  practi¬ 
cal  judgment,  energy  and  managerial  ability  in 
this  field  will  ever  be  as  important  to  the  success  of 
the  individual  farmer  as  they  are  essential  to  suc¬ 
cess  in  other  lines  of  business. 

The  volume  of  production  of  each  individual  is 
an  important  factor  in  the  prosperity  of  the  indi¬ 
vidual  farmer.  No  reasonable  price  for  cotton  can 

Southern  Pamphlets 
Parc  Book  Collection 
UNC-Chapel  Kill 


bring  prosperity  to  the  producer  of  four  or  five 
bales  per  annum.  Such  a  small  volume  of  busi¬ 
ness,  however  economically  conducted,  will  not 
support  an  economy  in  line  with  our  American 
standard  of  living.  On  the  other  hand,  the  problem 
of  the  cotton  grower  is  far  from  being  solved  ex¬ 
clusively  either  through  economical  production  or 
medium  or  large  scale  production,  but  can  be 
solved  through  a  combination  of  such  practices  as 
bring  about  low  costs,  a  reasonable  turnover  and 
a  price  obtained  for  the  product  in  excess  of  such 
costs.  The  price  of  cotton  to  the  farmer  is  the 
price  at  the  point  of  consumption  less  all  inter¬ 
vening  costs  and  profits.  It  will  therefore  be  ob¬ 
served  that  as  the  business  organization  of  the  cot¬ 
ton  growers,  the  responsibility  of  the  “Co-Ops”  is 
to  assist  the  growers  in  producing  a  quality  of  cot¬ 
ton  which  will  command  the  highest  possible  price, 
produce  it  at  the  minimum  of  cost  and  distribute 
it  with  the  least  waste  and  at  the  minimum  expense 
in  its  journey  to  the  consumer. 

We  are  now  beginning  the  eighth  year  of  this 
most  interesting  experiment  in  agricultural  eco¬ 
nomics.  Through  the  years  which  have  past  it  has 
been  necessary  to  revise  and  modify  many  of  the 
original  ideas  of  conducting  the  business  and  some 
of  these  ideas  have  not  only  affected  the  policies 
of  the  organization,  but  its  very  fundamentals. 

We  have  found  that  there  are  three  limiting  fac¬ 
tors  in  the  success  of  Co-operative  Cotton  Market¬ 
ing,  and  during  the  years  which  have  passed  we 
have  endeavored  to  profit  by  our  experience  and  to 
adjust  our  views  and  policies  in  line  with  what 
appeared  to  be  necessary  to  the  success  of  the  un¬ 
dertaking.  With  this  idea  in  view  it  has  appeared 
to  be  wise  to  broaden  the  activities  of  the  organ¬ 
ization  in  a  number  of  particulars,  but  it  should 
be  borne  in  mind  that  of  the  various  subsidiary 
activities  of  the  “Cotton  Co-Ops”  they  have  all  had 
their  direct  bearing  either  upon  the  cost  of  produc¬ 
tion  or  distribution,  or  upon  the  quality  and  value 
of  the  products  grown  by  our  members.  The  limit¬ 
ing  factors  in  the  success  of  Co-operative  Cotton 
Marketing  referred  to  above  are: 

1.  Loyalty  of  members. 

2.  Volume  of  business  of  the  organization. 

3.  Ability  of  the  management. 

LOYALTY  OF  MEMBERS  AND  VOLUME  OF  BUSINESS 

Loyalty  of  members  and  volume  of  business  han¬ 
dled  by  the  “Co-Ops”  are  so  closely  related  that  for 
the  purpose  of  this  discussion  they  may  be  con¬ 
sidered  together,  and  it  has  been  along  these  lines 


that  a  number  of  new  practices  and  changes  in 
policies  have  taken  place. 

We  have  found  that  loyalty  of  our  members  is 
no  different  from  that  of  the  loyalty  of  the  stock¬ 
holders  of  any  corporate  enterprise — that  is  the 
members,  like  stockholders,  expect  the  business  to 
assist  them  in  making  money.  Some  years  the  re¬ 
sults  of  the  organization  have  been  completely 
satisfactory  to  the  members  and  the  movement  has 
grown  and  prospered — in  other  years  the  results 
have  not  been  satisfactory  and  the  organization  has 
lapsed  insofar  as  membership  morale  is  concerned. 

In  some  States  practically  all  of  the  certified 
cottonseed  produced  by  the  best  plant  breeders  has 
been  purchased  by  the  “Co-Ops”  and  distributed  to 
their  members  at  cost.  This  has  resulted  in  im¬ 
proving  the  quality  of  the  cotton  grown  by  the 
members  on  the  average  as  compared  with  the  nom 
members,  and,  of  course,  has  reflected  itself  in  in¬ 
creased  prices  to1  them. 

In  some  sections  of  the  Cotton  Belt,  and  particu¬ 
larly  in  the  Eastern  portion,  the  use  of  commercial 
fertilizer  is  a  limiting  factor  in  yield  and  therefore 
important  to  the  cost  of  production.  Upon  making 
a  careful  study  of  the  subject  it  was  found  that  our 
members  in  that  section  used  several  hundred  thou¬ 
sands  of  tons  of  fertilizer  annually.  In  the  interest 
of  assisting  our  members  in  reducing  the  cost  of 
production  and  assuring  them  of  a  high  quality  of 
fertilizer,  subsidiary  organizations  have  been  set  up 
in  this  section  with  satisfaction  and  profit  to  them. 
In  a  similar  way  those  subsidiaries  distribute 
poisons  for  combating  insects — thereby  in  both 
instances  taking  advantage  of  large  scale  buying 
and  financing  opportunities.  These  buying  transac¬ 
tions  of  fertilizer,  poisons,  cotton  seeds  and  other 
plant  seeds  aggregate  approximately  $5,000,000 
annually. 

Recognizing  that  he  who  provides  production 
credit  controls  the  movement  of  the  crop,  and,  un¬ 
fortunately  it  sometimes  occurs  that  the  credit  mer¬ 
chant  or  local  banker  is  more  interested  in  the 
profits  out  of  handling  the  cotton  of  his  borrowers 
than  he  is  in  the  interest  which  his  loans  earn,  and 
in  other  places  where  the  local  banks  are  unable 
to  properly  finance  production,  it  has  become  neces¬ 
sary  to  set  up  in  practically  each  of  the  State  Or¬ 
ganizations  a  subsidiary  finance  corporation.  The 
agencies  loan  money  to  members  on  chattels  and 
other  securities  for  production  purposes.  The  ag¬ 
gregate  of  this  type  of  subsidiary  activity  of  the 
Co-operatives,  while  not  large  in  comparison  to*  the 
total  credit  requirements  of  our  members,  never¬ 
theless  runs  from  a  negligible  amount  in  some  of 


the  State  Organizations  to  as  much  as  $2,000,000  in 
others. 

It  is  well  known  to  all  spinners  that  cotton  is 
frequently  considerably  cut  and  otherwise  dam¬ 
aged  in  the  process  of  ginning.  Where  the  ginner 
is  more  interested  in  the  number  of  bales  which  he 
may  turn  out  of  his  gin  than  he  is  in  the  quality 
and  excellency  of  his  ginning,  great  losses  have 
been  and  are  still  sustained  by  the  cotton  industry. 

Generally  speaking  the  “Co-Ops”  prefer  to 
patronize  the  existing  channels  of  trade  wherever 
they  may  do  so  without  loss  or  penalty  to  the  organ¬ 
ization  or  to  the  members  as  individuals,  but  where 
experience  proves  that  they  may  not  obtain  reme¬ 
dies  for  abuses  in  the  practices  of  processing  cot¬ 
ton,  it  has  been  found  advantageous  to  set  up  sub¬ 
sidiary  corporations  for  processing  the  cotton  and 
cottonseed.  With  this  idea  some  of  the  State  Organ¬ 
izations  are  entering  into  quite  an  extensive  pro¬ 
gram  of  operating  gins  and  in  two  States  they  have 
acquired  interest  in  a  group  of  oil  mills.  The 
subsidiary  activities  along  these  lines  have  been  so 
satisfactory  and  profitable  to  the  organizations  that 
the  profits  from  these  enterprises  are  becoming  a 
matter  of  great  importance  in  reducing  the  operat¬ 
ing  expenses  of  the  parent  association. 

ABILITY  OF  THE  MANAGEMENT 

The  criterion  of  managerial  ability  in  a  co-opera¬ 
tive  may  be  measured  by  its  ability  to  obtain  a  high 
average  net  return  to  the  members  as  compared  to 
non-members.  This,  of  course,  must  include  the 
conduct  of  the  business  in  such  a  way  as  to  keep 
costs  at  the  minimum  and  to  sell  the  cotton  at  its 
full  value  and  to  perform  such  other  incidental 
services  along  the  lines  of  subsidiary  activities  of 
the  organization,  as  explained  in  this  article,  as 
will  serve  the  members. 

Other  important  changes  in  operating  policies 
may  be  of  interest  to  the  public. 

First — Originally  the  organizations  depended  up¬ 
on  the  unquestioned  authority  contained  in  the 
marketing  contract  and  co-operative  marketing  law 
to  enforce  deliveries.  The  theory  was  adhered  to 
that  wherever  there  was  absence  of  a  disposition  to 
voluntarily  stick  together,  this  would  be  supplied 
by  legal  coercion;  but  experience  has  proven  that 
while  the  organization  has  the  power  of  injunction 
and  specific  performance,  it  may  be  built  into  a 
powerful  and  influential  enterprise  only  through 
the  rendering  of  a  satisfactory  service  to  the  mem¬ 
bers,  which  will  induce  them  to  desire  to  deliver 
rather  than  to  require  them  to  do  so.  Thus,  through 
the  spirit  of  service  satisfactory  to  the  membership 


and  to  the  business  advisors  of  the  members,  this  is 
now  the  accepted  policy,  and  only  occasionally  is 
the  instrumentality  of  the  law  invoked  in  our  mem¬ 
bership  relations.  A  number  of  the  State  Organiza¬ 
tions  go  so  far  as  to  give  the  members  the  right  of 
withdrawal  at  certain  seasons  in  place  of  the  origi¬ 
nal  long  time  legally  enforceable  ironclad  contracts. 

Second — Experience  has  proven  that  many  thou¬ 
sands  of  cotton  growers  and  their  friends  believe 
in  the  principle  of  co-operation,  but  their  financial 
necessities  require  that  they  retain  the  option  to 
determine  the  day  upon  which  their  cotton  is  sold, 
rather  than  to  leave  to  the  organization  complete 
discretion  as  to  the  possible  time  for  making  sales. 
This  change  in  policy  has  resulted  in  securing  the 
widespread  approval  of  many  of  the  most  sub¬ 
stantial  cotton  producers  of  the  Belt  to  the  plans  of 
the  organization  and,  in  addition,  has  met  the  ob¬ 
jections  of  many  bankers  and  business  men,  who 
heretofore  have  withheld  their  approval  of  cotton 
co-operation. 

Third — The  “Co-Ops”  are  now  endeavoring  to 
substitute  reliable  information  concerning  the  cot¬ 
ton  industry  through  their  research  and  statistical 
studies  for  less  reliable  and  less  dependable  judg¬ 
ment  of  even  the  best  men  obtainable.  Modern 
business  science  determines  the  course  of  business 
procedure  largely  from  the  knowledge  of  facts  per¬ 
taining  to  the  various  industries  and  relies  only  up¬ 
on  the  interpretation  of  the  facts  by  the  best  trained 
minds,  who  are  devoting  themselves  full  time  to 
analyzing  and  dissecting  the  factors  of  supply  and 
demand  which  determine  business  trends.  En¬ 
couragement  of  the  first  order  has  accompanied  the 
use  of  this  information  almost  universally  by  the 
State  Organizations  during  the  past  year  for  the  first 
time,  and  where  used  has  proven  highly  beneficial. 
We  have,  however,  kept  the  developments  in  the 
industry  under  close  observation  through  this  de¬ 
partment  during  the  past  three  years. 

Fourth — The  broadening  of  our  policies  with 
reference  to  selling  the  mills  and  the  trade  gener¬ 
ally  on  such  terms  as  have  been  used  by  the  oldest 
and  best  conducted  private  cotton  concerns  in  the 
trade,  and  the  use  of  all  the  facilities  and  service 
known  to  the  industry  and  complete  latitude  of 
operation,  is  a  step  forward  in  Co-operative  Cotton 
Marketing  that  bids  fair  to  be  an  important  factor 
in  the  future  success  of  our  merchandising  program. 

Fifth — The  consolidation  of  our  sales  activities 
under  one  central  control  so  as  to  bring  the  full 
force  and  power  of  the  combined  volume  of  busi¬ 
ness  of  all  the  organizations  to  bear  on  the  market 
is  in  the  interest  of  stability  of  price  and  continuity 


of  service  policy,  and  of  reduced  cost  of  distribu¬ 
tion. 

Space  will  not  permit  the  details  of  many  im¬ 
portant  changes  in  policy  along  the  lines  of  opera¬ 
tions,  but  it  will  be  observed  from  the  foregoing 
statement  that  the  “Cotton  Co-Ops”  are  approach¬ 
ing  the  problems  of  serving  their  members  and  the 
industry  along  the  lines  referred  to  above  in  com¬ 
plete  harmony  with  the  trends  and  development  of 
modern  business. 

The  ramifications  of  the  Organization  extends 
wherever  cotton  is  bought  and  sold — America, 
Europe  and  Asia — its  volume  of  business  has  varied 
from  $75,000,000  to  considerably  over  $100,000,000 
a  year  during  the  past  seven  years — its  influence  in 
the  industry  has  been  to  purify  and  elevate  the 
standard  of  ethics  in  the  trade.  It  is  always  con¬ 
servative  in  its  plans,  purposes,  service  and  general 
policy,  and,  yet,  progressive  in  its  attitude  towards 
serving  its  members  and  in  its  organizational 
methods. 


OFFICERS 

C.  0.  Moser . President-General  Manager 

S.  L.  Morley . 

. Vice-President 

D.  G.  Hill,  Jr . 

..Secretary-T  reasurer 

Rae  Epstein . 

..Assistant  Treasurer 

<s^p 

BOARD  OF 

TRUSTEES 

B.  W.  Kilgore,  Chairman.... Raleigh,  N.  C. 

Allen  Northington.. 

....Montgomery,  Ala. 

K.  D.  Hellwarth . 

. Phoenix,  Arizona 

C.  G.  Henry . Little  Rock ,  Arkansas 

J.  E.  Conwell . 

. Atlanta,  Georgia 

N.  C.  Williamson . 

. Millikin,  La. 

X.  Caverno . 

....Canalou,  Missouri 

C.  L.  Neill . 

. Jackson ,  Miss. 

U.  B.  Blalock . 

. Raleigh,  N.  C. 

J.  L.  Flow . 

... Hobart ,  Oklahoma 

Alex  S.  Foreman . 

.Sallisaw,  Oklahoma 

Alfred  Scarborough 

. Columbia,  S.  C. 

B.  C.  Pittuck . 

. El  Paso,  Texas 

F.  E.  Green . 

...Delano,  California 

Tait  Butler . 

. Memphis,  Tenn. 

Harry  Williams . 

. Dallas,  Texas 

Lynn  Stokes . 

. Dallas,  Texas 

